The November construction PMI came in broadly in line with expectations. The headline index fell to 52.3 (consensus/BarCap: 52.0) from 53.9 previously. The housing activity index reported a healthy increase to 53.0 from 49.3 previously, with the index consistent with expanding activity in the sector for the first time since May.

The commercial activity measure fell by 0.7 points to 53.9, but at this level should still be providing significant support for the overall sector. The civil engineering index, which is largely dependent on government infrastructure procurements, fell by 0.6 points to 49.9, consistent with falling government spending on infrastructure projects as part of the fiscal consolidation plan.  
 
Staffing levels rose for the third month running, albeit at a modest rate. The employment index increased to 52.2 from 50.3, indicating the fastest pace of employment growth in the sector since March 2008. Companies noted they had increased staffing levels as a result of growing new orders and business activity, although it remains to be seen how sustainable this employment growth will be against the backdrop of slowing overall activity.
 
The main surprise in today's data comes from the improvement in the residential construction measure. This was preceded by better-than-expected house prices and mortgage lending data earlier this week, altogether indicating some improvements in the UK housing market. Nevertheless, we do not expect this improvement to be sustained and expect the deteriorating economic outlook, rising unemployment and subdued consumer confidence to weigh on the housing market and residential construction. Furthermore, we would point out that the construction PMI outperformed the official data for Q3 and we might see some further catching-up with the official data in the coming months.


source: BarCap